Pension Benefits: The NDA government intends to improve pension benefits for central government employees covered by the NPS. The proposal includes offering up to 50% of the last basic pay as a pension.
Committee Formation: A committee led by Finance Secretary T V Somanathan was established in March 2023 to explore ways to enhance pension benefits under the NPS without reverting to the non-contributory Old Pension System (OPS), which is considered fiscally unsustainable.
Andhra Pradesh Model: The committee’s report aligns closely with the Andhra Pradesh NPS model introduced in 2023. This model ensures a monthly pension of 50% of the last drawn basic pay if the annuity falls short, with additional provisions for the spouse of a deceased subscriber.
Cost of Living Adjustments: The proposed scheme would include cost of living adjustments based on inflation to the last drawn basic pay.
Guaranteed Pension: The proposed scheme would guarantee a pension of 40-50% of the last pay, with adjustments based on years of service and any withdrawals from the pension corpus. The central government’s budget would cover any shortfall required to meet the guaranteed pension amount2.
Beneficiaries: If implemented, this could benefit around 8.7 million central and state government employees who have been enrolled in the NPS since 2004.
Dearness Allowance: Additionally, the Union Cabinet approved a hike in Dearness Allowance for central government employees and Dearness Relief to pensioners by four percent from January 1, 2024.
These updates indicate a proactive approach by the NDA government to enhance the financial security of central government employees post-retirement.
